Scottish Midland Co-operative Society (Scotmid) saw profit rise slightly in the first half with strong performance at its food convenience and funeral services.

Operating profits for the 150-year-old group - which includes Scotmid, Semichem, Fragrance House and a substantial property portfolio - were £4.2million compared with £4.1m at the same point last year.

Scotmid's half-year turnover increased by five per cent to £178m and net assets grew from £93m to £99m.

It also benefited from a one-off gain of around £6m from the sale of one of its larger Edinburgh stores.

This pushed pre-tax profit up from £3.2m to £9m while net debt reduced by around £1m to £24.97m.

Chief executive John Brodie said the focus was on growing the convenience store portfolio organically and through acquisitions.

He said: "We have spent around £8m in the first-half in acquisitions and store refits, which takes our overall investment in refitting the 140 stores to around £20m.

"We are two thirds of the way through with the refit project which we hope to complete by 2013.

"Convenience grocery is the fastest growing market in the food arena at the moment and, although we are facing increasing competition from some of the larger supermarket chains, we are continuing to generate strong revenues from a loyal and growing customer base."

The company completed 12 refits and opened four new convenience stores in the first half of the year.

Brodie said Semichem held up well in the first half even though cross border trade had fallen back across its 30 stores in Northern Ireland.

He added: "Semichem's core business in Scotland performed strongly but profit was impacted by the reversal of cross-border trade in Northern Ireland.

"Our new venture, The Fragrance House, is already doing fairly well and now has three stores open in Dundee, Livingston and Buchanan Galleries in Glasgow."

Brodie warned looming public sector spending cuts and the rise in VATin the new year could affect performance in 2011.

Headded: "Going into next year, it will be very difficult to maintain our current levels of profitability, but the sectors we operate in arefairly robust."